Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to persuade shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to persuade shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their wish, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors US:TSLA — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their wish, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their wish, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking stiff Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to persuade shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rigid Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to persuade shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to persuade shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their wish, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to persuade shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking stiff Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rigid Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their wish, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock-hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained stable around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their wish, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrical cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking stiff Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enhanced. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to coax shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their fantasy, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Trio, according to Edmunds.com.

Credit-tracking stiff Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Three,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the slot.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to persuade shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Individual finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Three months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations leaped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enhanced by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained constant around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Three,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the crevice.”

This article was very first published on Jan. 26, 2016.

Why some Americans are using 8-year loans to buy fancier cars

Why some Americans are using 8-year loans to buy fancier cars

Published: Feb 17, two thousand sixteen 12:20 p.m. ET

ClaudiaAssis

At Shaun Del Grande’s car dealerships in the San Francisco Bay Area, the salespeople sometimes find themselves attempting to woo shoppers to buy less car, spend more cash, and use more traditional financing.

That might seem like an unusual sales tactic to those familiar with car-dealer stereotypes. But it reflects a switch in the way many buy cars: Longer loans — for six, seven, or even eight years, rather than the traditional five — are more common, tempting buyers to take on more debt to buy more expensive vehicles.

Over the last ten years, the length of the average car loan has risen above sixty eight months, driven by cheaper financing, lower interest rates, and postrecession request. Six-year loans are “very common right now,” said Edmunds.com analyst Jessica Caldwell.

Experts say the longer loans have boosted car sales; some economists wonder whether they point toward more delinquencies. Private finance and car-buying experts, meantime, generally caution against the loans, which lower payments but mean more interest and finance charges. “We always tell [customers] that this is marathon, not a sprint,” Del Grande said.

For now, however, they remain a popular option. Jason Freese, a lending consultant with Alliant Credit Union in Chicago, has helped “payment-sensitive” buyers into electrified cars from Tesla Motors TSLA, -1.63% — its basic Model S sedan starts around $70,000 — using loans as long as seven years.

“It realizes their desire, and it fits their budget,” Freese said.

Average loan length rises

The average length of car loans has risen steadily in latest years. While five-year — or 60-month — loans were traditionally the longest most lenders suggested, they began to lengthen around two thousand twelve as a means of enticing buyers as interest rates stayed low and credit became more widely available after the financial crisis.

Cars, meantime, have grown more expensive as they incorporated advanced technology, such as driver-assistance systems and high-end entertainment and connectivity options.

Ten years ago, the average loan length for fresh vehicles was 63.Trio months; in November, it was 68.Three, according to Edmunds.com.

Credit-tracking rock hard Experian says loans with terms lasting seventy three to eighty four months accounted for almost 28% of all fresh vehicles financed in the third quarter of last year, up 17% from the same quarter a year ago. That share hit 30% earlier in 2015, the highest percentage since Experian began reporting the data in 2006.

Longer loans have helped buyers go up a level in size or luxury, according to Caldwell, but they have also been a “big driver” of auto sales generally. Last year was among the best ever for the industry, with some analysts estimating that more than eighteen million vehicles sold.

Sales were under twelve million five years ago in the wake of the financial crisis, according to citation; they were under seventeen million in 2005. The previous banner year was 2000, when more than seventeen million cars were sold, according to Edmunds.com.

Lower gas prices and effortless credit were among the reasons for last year’s numbers, according to analysts at Stifel, as were low interest rates; By making savings unattractive, said Jack Nerad, executive market analyst at Kelley Blue Book, low rates lead some to determine that “I might as well buy a car.”

That meant a surge in car loans and an accompanying boom in “subprime” car debt, according to the Fresh York Federal Reserve, which defined subprime originations as loans to borrowers with credit scores below six hundred twenty — about 20% of all lenders — in a November white paper.

Third-quarter two thousand fifteen car oan originations reached $157 billion, the highest in a decade, according to the Fresh York Fed. Total car loan balances stood at $1.05 trillion as of late September, up from around $900 billion in mid-2014.

Subprime car loan originations hopped to almost $40 billion in the 2nd quarter, dipping only slightly in the third quarter, according to the Fresh York Fed.

“The total number of subprime originations has since reached a 10-year, precrisis high, only surpassed by the unique periods in two thousand five that were associated with ‘employee pricing’ promotions and record sales for the auto manufacturers,” the Fresh York Fed wrote.

The increase in subprime car loans may stoke fears of eroding credit standards, which could lead to more delinquencies or repossessions. But the Fresh York Fed cautioned that its data wasn’t adjusted for inflation — and the prices of fresh cars have enlargened by about 6% in the past ten years, so “although the level of subprime loans is comparable to that from a decade ago, it is likely lower in real terms.”

The share of buyers delinquent for more than ninety days on their car loan has remained sustained around 3%, meantime, an improvement from the 5% rate that prevailed five years ago.

Pent-up request for fresh cars

As vehicle prices have risen, average car loans and monthly payment amounts have also enlargened. The average new-car amount financed was expected to reach $29,121 in 2015, up $Trio,121 from 2010, according to Caldwell; the average monthly payment was projected to hit $492, up $21 over the same period.

It’s common for buyers to overextend when buying fresh cars, according to Nerad. Getting one can be joy, he said, and many postponed purchases after the financial crises, leading to pent-up request.

Edmunds.com and many financial advisers recommend loans no longer than five years, or sixty months — shorter if the buyer can afford it. Longer loans mean more interest and finance charges, and cars tend to depreciate rapidly after the five-year mark.

Take the average price of a fresh car in 2015, $33,443, and an average interest rate of Four.6%. Assuming a typical $Five,000 down payment, the buyer would’ve paid $Trio,412 in interest at the end of a five-year loan. An eight-year loan lowers the payment from $531 to $354, but the interest paid increases to $Five,543.

Buyers who use longer loans to keep payments low, experts say, are essentially paying more to make larger or fancier cars seem affordable. While many Tesla buyers make more than $200,00 a year, Freese said, some making half that — or even less — have used them to get into the cars.

“If you extend a car loan for another year [the payments] fit in their budget,” Nerad said, even as they get “deeper and deeper into the fuckhole.”